The rough ride to more efficient payments

By: Published on: May, 2013

Harmonised payments across Europe will not meet the goal of launching by February 2014, because some countries are taking advantage of a two-year extension to the deadline for adopting agreed standards. Businesses still need to adapt to a single system for processing payments across Europe, and they will initially handle data in different ways from country to country.

Many companies are finding it
hard enough to become compliant with the Single Euro
Payments Area (SEPA) legislation in time  and now they
will have to process payments in two different ways until 2016.

Some will be handled within SEPAs cross-Europe
guidelines but others will need to be done on a
country-by-country basis  the very thing the new system
sought to stop.

Research by EuroFinance shows more than half the businesses
operating across Europe have not yet finalised their plans to
adopt SEPA, the European Commissions drive to simplify
and harmonise payments across the continent.

According to the European Central Bank (ECB), less than two
per cent of the market has started using it for direct debits
and only a third for credit transfers.

It seems the authorities had an over-simplified view of the
technical requirements needed when they set their timetable.
Most small and medium enterprises, and even some big
multi-nationals, say they wont be ready in time.

The Commission is not going to move its deadline of 1
February though, so businesses need to work closely with their
banks and move heaven and earth to ensure they are ready in
time.

A key requirement, announced by the Commission at the start
of 2012, involves all relevant organisations being able to
present their data in the agreed, standard format for SEPA
 called ISO 2022 XML  by February 2014.

But some countries, like Spain and Italy, have applied for
the two-year waiver from these standards.

This wipes out the concept of a level playing field. Even
though everyone will be using the same platform, there will be
differences in the standards used among countries.

Achieving harmonised payments across the continent has
therefore become a three-stage process.

Firstly, the market needs to achieve mass migration of all
companies, financial institutions, public authorities and
consumers on to SEPA, using the required XML standards, by next
February.

Then, we embark on the real road to achieving its ultimate
goal  eliminating country variances and ensuring
companies are making the most of the benefits.

And finally there are the wider, long-term preparations,
with businesses ensuring they can operate within the uniform
payments process for years to come and use the relevant
technology and standards in other areas.

Many companies had a wait and see approach to
SEPA and were reluctant to invest in the technical
infrastructure needed to meet its migration requirements. They
are therefore now late in their preparations to fully leverage
the true benefits of the system.

This is where banks can help. Companies need to work with
them to ensure they can process payments in this drawn-out
transition phase as efficiently and cost-effectively as
possible.

Banks are digesting the complexity of each countrys
plans to migrate their data to the SEPA standard and advising
their clients accordingly. At RBS, we are doing this while
providing a platform  the SEPA Accelerator  to help
bridge the time gap between now and full migration.

Companies also need to future-proof themselves by adopting
SEPAs XML standard as soon as possible. It really is the
standard of the future  not just for payments but
beyond.

For example, the Electronic Bank Account Management (eBAM)
scheme, which will enable companies to manage bank data,
corporate signatories and accounts online, is based on the same
XML standards.

More broadly, SEPA will be the blueprint for a host of other
pan-European, e-commerce programmes waiting in the wings, such
as e-mandates and e-invoicing.

Companies need to look at their digital agenda and think
about how the work theyre doing now can provide benefits
across their entire operations for years to come.

When fully up and running, SEPA will bring one, simple,
fully integrated payments system across the European Union. It
will see an end to payments being made in different ways
depending on the country  creating a uniform process.

Were not there yet, and achieving it has become even
more complex and troublesome than initially expected. But with
the right support from their banks and a forward-looking
treasury strategy, companies can make it easier on themselves
and start enjoying the benefits sooner than they
think.

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